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Investors are in “full bull” mode, deploying more money into emerging markets, small-cap stocks and the banking sector on hopes a COVID-19 vaccine will turn around these hard-hit market segments, BofA’s monthly investor survey showed on Tuesday.

Global stocks hit a new record high on Monday as positive data for a potential COVID-19 vaccine came from Moderna, following similarly upbeat data from rival Pfizer. Investors surveyed by BofA expect a “credible vaccine” by January.

The euphoria sent investors' cash levels down to 4.1% in November, from 4.4% last month, to pre-COVID-19 levels last seen in January, according to the survey of 190 fund managers with $526 billion in assets under management.

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With global economic growth and profit expectations running at a 20-year high among the investors surveyed, the “reopening rotation” into oversold business sectors is likely to continue in the fourth quarter, BofA said.

But the bank advised clients: “We say ‘sell the vaccine’ in coming weeks/months as we think we’re close to ‘full bull’.”

Meanwhile, in U.S. Treasuries, 73% of the investors surveyed were expecting steeper yield curves -- rates on longer-term U.S. Treasury securities rising faster than short-term rates. Expectations were far higher than after the 2008 Lehman bankruptcy, 2013 taper tantrum and 2016 elections.

For 2021, investors named “long” emerging market assets, S&P 500 and oil as their favourite trades. Nearly half of the investors surveyed by BofA said they expect emerging markets to outperform in 2021.

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